By Lawrence G. McMillan
The S&P 500 index /zigman2/quotes/210599714/realtime SPX -0.54% probed up to – but not beyond – its all-time highs at 4238. The failure to break through to new highs this week gives the bears another chance.
The broader picture is that the index has been trading in a range between 4060 and 4238 for nearly two months. Given the length of time the S&P has spent inside this range, a breakout from the range should be significant.
An aggressive way to deal with a trading range is to buy the market near the lows of the range and sell (short) the market near the top of the ranking, planning to reverse your position if the market does indeed break out of the range. A less aggressive trade is to buy straddles when SPX is near the top or bottom of the range, figuring that it will either break out or trade to the other side of the range.